Money and Cyberspace
Note: if you enjoy the conversations below I’d love for you to join us on November 5th 2020 at:
https://futureofmicropayments.web.app
If you were William Gibson
and you’d dropped a 100 yen coin into Puck Man in the Shibuya District of Tokyo on May 22nd 1980 you might possibly have been able to extrapolate the future that is now unfolding. You’d have felt it at the very least. The dopamine rush of steering your glowing yellow pac man around Tori Iwatani’s Inky, Blinky, Pinky and Clyde. The raucous steel hail of nearby Pachinko. Bright flashing lights. A crowded space to be alone: filled with school children, young couples, salary men. Smoke and sweat; time enough for a game before your train arrives. A break during work. Before you meet your friends and head off into the night. Before you go home.
But William Gibson’s short story Burning Chrome wouldn’t be released until July 1st 1982. The notion of cyberspace(*) didn’t exist yet. And the Internet wouldn’t emerge for another decade. We simply didn’t have the words for the conversations we wanted to have: the conceit that we could jack into a “consensual hallucination, experienced daily by billions of legitimate operators in every nation in a global network of unthinkable complexity”. A few early overachievers like Ivan Sutherland had been playing with VR helmets but that future was not yet widely distributed.
Yet, still, at that time and that place, you might have been able to anticipate the future of art, media, social spaces and importantly a revolution occurring to money itself. A revolution presaged by thinkers like Ted Nelson, and one that has been 50 years in the making.
We are at the joining of two macro trends. Let’s call them math and magic. Or, if you want to be precise: the Byzantine Generals Problem and Interactive Video Games. Together these ideas will tear down the walled gardens we live within. We will foster direct relationships with creatives that we love and we will in turn have direct connections to people who love our work. The line between consumer and creator will become deeply blurred. Our work will be visible everywhere, we will be directly compensated for our contributions to the artistic record of humanity.
This is the story of how this future is emerging.
Today, Circa 2020
we are in the midst of a once in a lifetime pandemic. A moment that will divide our lives into “Where were you before the pandemic?” and “What did you do after the pandemic?”. Our entire world has been accelerated into the virtual, and the virtual is groaning from the weight of our collective hunger, our desire for commerce, for creativity, for art, for connection.
It’s been a hard year for a lot of us.
We’ve lost our jobs, our security, we’re worried about the future. We are watching a rush to “might is right” fascism and political unrest. We see an environmental crisis and wonder how we’re going to fix it. Inequity looks more like a Gilded Age than the ideals of democracy that we recited in school. It’s been the start of the great digital diaspora. Our friends and peers are remote; viewed through a small Zoom window. We take half our meetings with our hair sticking out at odd angles and children and pets clamoring in the background.
But for others, such as Epic Megagames, this is in fact a breakout year. Their game population sizes are shattering previous barriers. The Fortnite interactive Travis Scott concert, released in April 2020, had over 10 million simultaneous attendees:
https://twitter.com/FortniteGame/status/1253524351376330752
Let’s just dwell on this fact a bit. 10 million players is a mind bogglingly huge number, even for what is admittedly an e-sports event. This means 10 million people in front of their computers, with live connections to a live server, getting 3d content streamed to them through some huge array of cloud hosting services — and having one on one engagements with a proximate 100 other people. Rendered interactively in real time. If this isn’t Cyberspace it is getting awfully close.
If you want to understand why this is bigger than “just games”, why this is a macro-trend then consider how AOC brought 700k young voters, enough to sway an entire election, together to play “Among Us”:
New York Representative Alexandria Ocasio-Cortez on Tuesday night held a virtual get out the vote event that involved her playing the popular online game “Among Us” with fellow Representative Ilhan Omar and popular streamers. The session was streamed on Twitch — a platform that allows people to broadcast themselves playing video games — and it became one of the most-watched livestreams in the history of the platform. According to CNET, the stream maxed out at 439,000 concurrent views, good for the third-most views ever for a single Twitch stream. The record is held by Ninja when he played Fortnite with Travis Scott and Drake and racked up more than 600,000 viewers. However, according to Gamespot, combining Ocasio-Cortez’s numbers with those of her fellow streamers likely puts the total viewership at over 700,000.
Games as Art
It’s hard to really appreciate the exact nature and feel of the online digital gaming industry if you are not an avid gamer. Games themselves tend to be somewhat under-appreciated. A form of low art.
Part of this is because it is somewhat hermetic. You have to be in the game to play it — you can only catch glimpses otherwise. It has appeared whole cloth in a digital realm; not evolving from a traditional realm. We think about other media like TV or Music as part of a continuum of human experience. But games on digital media are almost an entirely different beast from traditional real world games; the closest comparison may be real world sports possibly. Yet at the same time this ‘invisible industry’ earns $143b revenue per year, and the music industry only earns $24b per year. TV and video still dominate at $290b but they’re not far ahead of an industry barely of drinking age.
But the real truth is that these aren’t in fact “games”. In a sense calling these things games is a stealth move; it’s a way to say “we are making art” or “we’re making something that doesn’t fit in a box”. To escape the procrustean coffin of definition. Outside of our critical gaze, outside of the money itself, something beautiful, artistic and sincere is emerging.
We are entering a time when anybody will be able to tell a story as an interactive experience, anybody will be able to create art that immerses and that convinces. It’s a new medium; perhaps one that many do not have patience for yet — but a future where many of us will ultimately live.
Barriers are coming down simply and technically. Creative tools are widely distributed. What we each can create has increased. A plateau is being reached. When we talk about “games” what we really are talking about is the ability for any of us to tell our own stories, to make our own art, and to do so in as compelling a way as the well funded studios of yesterday.
Still — something is missing.
Right now we don’t have sufficient incentives. We cannot make any money. We literally cannot afford to focus our energy on creative acts. And it is hard to participate because the markets are captured by the big players. You can make money if you are big, but you can’t get from small to big. Rungs are missing.
Captive Markets
I’ve always admired the constitution of the United States. Less for the literal words but for the “reading in”; how by implication a rule grows to be more general. The ideals are noble and they frame a space that a greater plurality of stakeholders not only live but thrive within.
Americans, as many other countries, have defined a captive market that benefits a plurality of its citizens, at least in theory. There is an agreement on currency, an agreement on taxation. And there are laws to disallow other currencies. More to the point these are systems that are highly transparent. They are intended to be accountable to their stakeholders. We can argue that these systems don’t live up to their promises, we can argue a tyranny of the masses; but at least there is an intent to be fair, and systems that enshrine stakeholders appear to be more fair than systems that do not.
When we look at the market for creative arts however, there can be substantial barriers to entry. They are not “by the people for the people”. Some participants are privileged, others are not. To make a movie, to make a song, to make a game, to publish a book — these take teams, budgets and then ultimately the approval of an iron fisted god. You come to the wall and must beg for approval. And then sometimes ideas that threaten the walled gardens themselves and are simply not permitted.
As one example it is not legal to use the Unity 3D Game authoring toolchain to make a game that allows players to make their own games. Unity3D tightly controls that degree of freedom. You are permitted to tell a story, but not to create an environment where others can tell stories.
We can go even further and look at smaller works such as to make a new avatar in a video game. Here you’re at the whim of the publisher who has absolute control over their product and everything in it. Consumers often cannot sell their own content at all inside of somebody elses game.
But this is changing, both in the large sense and the small sense. Competitors are fighting Apple head on. And game developers, ever keen for revenue, are starting to build in-game economies that change the agreement between creator and consumer. This is all taking place against an even broader landscape that is challenging national hegemonies and larger formal currencies.
The Wallet Wars
Up in the stratosphere there’s a battle royale taking place between the gods. They cast lightning bolts that deform the physics of our entire world.
Some have been calling it “The Wallet Wars”. It’s a battle between many different consumer payment providers, a battle between game companies, a battle between governments and corporations. A battle between walled gardens and the open net. Between ideas of centralized payments and distributed payments. A battle between economists, lawyers and mathematicians and cryptographers. It’s a battle over your wallet but also over your identity. Because in fact, money is trust, and money is identity.
This battle is visible when you have to buy a subscription to read a single news article. When you buy apps from an app store rather than from a website. When creators beg you to support their Patreon or even OnlyFans to survive (rather than surviving off the actual sales of their own work). When you’re inundated with fake news and alarmist news and propaganda instead of anything vaguely resembling sincere and honest reporting.
But the battle is mostly waged in ways that are less visible. You don’t see anything for sale on the web for 25 cents here in the United States. You don’t see tiny voting services or applause services or tipping services that use real money. You don’t see reporters being funded directly by their readership. You don’t get the pleasure of having a largely advertising free online experience. These are all side-effects of a visa shadow at the low end of the payment spectrum; a transaction gap that payment rails have been too lazy to service. In other countries such as China, where they take a different approach, you do see novel kinds of services that are hard to imagine in the west. For example you see authors who pay their rent by selling books by the chapter, where you pay 25 cents for each successive chapter of a story.
The battle is over who gets to be the troll under the bridge. Who gets to demand the toll of those fractions of pennies. Who gets to treat us as their fiefdom, as their cattle. This one that affects not just what we buy but also our identity, our freedom, our collective wealth, our creativity, our ability to make utterances in the public sphere and be heard.
Apple Versus Epic
I’ll pick just one appropriate example of this battle to examine — there are many — and they are all fascinating.
In Apples court filings against Epic Games, Apple “stressed” that it “is not a monopolist of any relevant market,” saying that Fortnite players can access the game on other hardware such as the PC and game consoles.
https://www.macrumors.com/2020/08/13/fornite-adds-direct-payment-option-on-ios
Apple is of course being disingenuous. Apple’s App Store is a runaway success. The mobile web has gone from 100% market share to 10% market share in the last decade. Almost all small online purchase revenue has moved either to the App Store or the Google Play Store. Mega companies are the new gatekeepers for a critical market. Everybody that wants to sell product has to do so on their terms. For Apple this means a 30% cut in the first year, and a 15% cut in successive years. It also means meeting arbitrary criteria around what constitutes acceptable product. Apple in particular has 100% full censorship control over any product that is in the app store. That means if there is certain kinds of speech Apple doesn’t approve of — they can simply silence those voices — without a larger group ratification. And this is in fact exactly what they’ve now done with Epic.
But what’s really going on here is slightly different from what appears to be going on. Yes, Epic wants to be able to directly sell their own products. And yes their products happen to run on hardware that Apple tightly controls. It is an entirely valid question to ask “Should Apple get a cut of Epic revenue? What cut is appropriate?”.
The deeper issue, or more real issue, is payments in general. Basically traditional payment rails are too slow, guarantee the wrong things, and are simply not a good match for high-velocity low-value pay-as-you-go single click purchases online. Early monopolists in lightweight digital payments (such as Apple) seek to hold onto their improvements to payment systems as long as they can. Apple deserves credit for smashing the absurd telecom barriers against smartphones. And companies like Nokia deserved to be smashed. Ultimately, the Apple Century will end: Apple, Google and other monopolists will yield. But it will be messy.
Sprinkle it with Blockchain!
Game Developers are like water, they try to go around barriers. As markets are locked up, and revenue captured upstream — they begin to to build new universes with new physics that are more fair to themselves. And like coming to a new world they look closely at their constituency, their stakeholders, and seek to define markets that maximize the reward for all parties. By letting go of attempting to control a bottom level of the physics everybody moves to a higher level of emergent behavior.
Games, especially multiplayer online games can be extremely high risk to develop. A hit can make a career. A miss will often bankrupt a studio. And it is hard to break even. It is often winner take all. Like the film industry this is still very much a coterie of experts — and somewhat a bit of a nuclear arms race between different teams.
Developers therefore are always looking for money — not necessarily money up front — more rather looking for stable revenue models before starting development. They need to convince investors that the 1m or 10m that is going to go in has a chance of coming out magnified 10x. They also need to convince themselves. The labor of building a game is like losing a year or two of your life. It can be all consuming.
One obvious pitch to funders is that “a game can be an economy”. If there is a way that shop-keepers can set up virtual online stores and also make money then (in theory) everybody wins.
The natural technology to reach for is blockchain. And in fact today crypto and public ledgers do more than help. They are basically the genie in the lamp. A power equal to anything that humanity has made. The power of code as law.
Public ledgers make it possible to have durable trustworthy money systems inside of games. Systems that are harder to abuse; that are more real. Systems “bigger than” the game-world and that exist outside of it. And as a result we see an explosion of people at least trying this.
Note this aspiration to create game economies is not new. We saw it in Second Life and in many other pre-blockchain games. In 1998 — I myself was in the games industry at Postlinear Inc working for Ron Martinez. We built two large games for Sega — 10⁶ and Vigilance. These were typical for the era 3D MMO style games. In fact these games were computationally intensive enough that I can recall spending some time at the colo after we shipped to do a patch; working on optimizing the game inner loops to reduce the temperature of the colocation facilities as a whole. Even back then both of these games had an idea of “Limited Edition Digital Objects”. We even hired Bruce Schneier, the world renowned cryptographer to help us.
Universal Acids
When Darwin proposed the idea of survival of the fit; he crystalized a shift in mindset that had been coming for a hundred years. Up until then science itself had been a quasi-romantic interpretation of reality. Early rigorous thinkers such as Humboldt had sought to closely observe the natural world, record it, understand relationships and patterns, but very much saw the world as infused with magic. Darwin dissolved a kind of hopeful teleology into his framework. His idea was simple, a rule that could be reproducibly applied to produce the world as it was seen. And — for better or worse — everything then became side-effects or aspects of his observation. We call his idea a “universal acid” in that it dissolves other ideas into it; even if those other ideas came first.
Public ledgers are similar. Like a powerful idea wielded by a demagogue they dissolve everything they touch into themselves. In this case they dissolve the idea of games themselves. Powerful ideas are almost a case of “be careful what you wish for”. They eat away at the structures that created them.
The first innocent step is that a game adds a public ledger to track artifacts. Then the next step is letting game players create value; opening their own stores in a game world. And then the next step is where game artifacts move *between* games. Then we start to see speculators, and we start to see limited edition digital objects — or non fungible tokens — stand on their own — outside the game. Now ideas of what is “real” become a pointer to the blockchain. You prove that you “own” something because you alone have the keys to that blockchain entry — not because you have an account *in* a game — not because the game owner has so deigned to let you play.
After a while we see a game itself as a series of blockchain artifacts. To decompose every aspect into a portable artifact that is under participant control.
Ultimately the game itself becomes a side-effect; a kind of sea or liquid of game experience that can be sipped, saved, dispersed through myriad containers and the containers are commodified.
Where this ends is unclear. We may soon even start to see a generalization of the game physics and rules such that richer behaviors can move between these universes; there will certainly be pressure to do so.
We will certainly see gamification of the real world; where ordinary everyday activities start to have game rewards. We already see this real world behavior with Pokemon Go to some degree (although for some reason unbeknownst to me they’ve not yet created value chains where ordinary game players can participate in the financial rewards).
The invention of Micropayments
There’s a lot to be said for being an artist. It gives you a keen awareness of the value of art, of stress points around real desires to communicate and how hard that can be, and also a strong sense of the costs and labor it takes to be able to keep doing what you love. I often wonder how anybody can do anything without some kind of aesthetic perspective in fact.
As a writer and a movie-maker in the 1960’s Ted Nelson observed what he felt would be a coming crisis. It looked like computer screens might possibly replace paper, and in so doing sever an implicit agreement: that the party who created the words would be paid for those words. In traditional media there is a well established chain from author to publisher to consumer. But in digital media it is easy to very easily break this chain.
He noted that “ We will need mechanisms corresponding to all aspects of paper literature: writing, annotation, publication, presentation, scholarship, archiving, preservation, librarianship. All these must be rethought and remapped to this new world. Some may become simpler, some may not”. Further he thought “somehow royalty payments to each author/publisher must be automatic, to simplify and lubricate transactions”. Micropayments as a solution fell out of this. There’s an observation that if any snippet of content itself embeds a back reference to the owner, then there’s an opportunity to compensate the creator.
Yet text and words may not be the place where Teds vision succeeds. It is almost ideally suited for richer interactive 3d worlds. There’s not much of a leap from his ideas to imagining a video game or an experience, made up out of content from many participants, rewarding each of the authors a little bit. And modern cryptocurrencies are practically designed to do this well.
We have to remember that people want to celebrate and compensate creators, and often they want to be witnessed as enjoying that content. Like many systems we build these are consensual relationships. Yes we can always run photocopies off of a book, but in so doing we break a rule: “don’t kill the goose that lays the golden egg”.
DEFI’s and NFTs
540 million years ago the fossil record shows a sudden astonishing explosion in the diversity of life forms. What was up until then an ocean of largely single celled organisms suddenly became complex multi-cellular entities with extravagant survival strategies. Complex environmental pressures catalyzed life to begin to respond in kind; by evolving.
In January 2009 Satoshi launched bitcoin, and the cryptocurrency revolution, by mining the genesis block. This code was based on his original whitepaper “A Peer-to-Peer Electronic Cash System” published at the end of the last financial crisis in October 2008.
From this point we’ve seen a steady uptick in kinds of public ledgers. Bitcoin is now surrounded by dozens of other flavors of public ledger — many with significant capitalization.
Pressure to escape the gatekeepers continues. Communities are forming new consensual agreements, finding their stakeholders, and evolving their products. Much of this is founded around an idea of “fairness”. People flock to spaces that don’t have the same kind of aristocracy; that seem fair.
The space of cryptocurrencies as a whole is called DeFi — short for distributed finance. Effectively these are contracts between the parties in the network. As of today there are about 15 billion dollars locked up in decentralized finance contracts. This has doubled between August and September 2020. In a very real sense DEFI’s are the universal acid; they are dissolving every other financial instrument they touch into themselves.
But DeFi itself is just the beginning.
Public ledgers are admittedly novel financial instruments. They are able to easily take on roles that only private ledgers (bank accounts, store records, county records, mortgage records) could handle before. Antique financial products are being securitized on the blockchain. This means corporate stock records, ordinary money, physical assets, provenance, ownership, liens, contracts and other agreements. My own last venture tokeniq.io was a very boring, very pragmatic venture to convert corporate stock allocations to a public ledger for example. The assets being represented are “unique”.
It is this uniqueness that is becoming central.
For example if you borrow one bitcoin from a friend, and return a different bitcoin, it doesn’t matter much. But a non fungible token (NFT) encodes unique properties that cannot necessarily be substituted. An NFT representing a specific power in a game is not necessarily equal to another NFT representing a different power in a different game. Or an NFT representing a plane ticket to Japan is not the same as an NFT representing a plane ticket to Berlin.
Now there is something of a safari hunt, to capture, identify, own, carve-up and resell the “kinds of space” and “kinds of artifacts” that may exist. We see this with projects like Decentraland and SomniumSpace — where the creators are attempting to put the metaverse on the blockchain. And we see this in sites like SuperRare and OpenSea that are attempting to capture a space of digital art. Earlier projects like Cryptokitties are also good examples.
The way to think about this is that NFTs are like cells. They contain the functions needed for life. They can increasingly live on their own — not at the mercy of their host container.
The key, unique and special armor of an NFT is how small it can be. NFTs effectively can be micropayments. And therefore what NFTs allow is anybody to begin to play with the fabric of money itself. One doesn’t have to ante up a million dollars for this poker game.
If money is a consensual system of agreements that we make, intended to benefit a plurality of stakeholders, then what is occurring now is a legitimization of voice.
We are all becoming empowered to make artifacts, publish those artifacts and nobody can stop us. Nobody can say “no, you must jump through these three hoops to publish this artifact”. Nobody can say “you’re not allowed on our platform”. Nobody can price things out of our reach. NFTs sneak through the cracks.
Where do we go now?
If we can lower the barriers to creativity — not just with better art tools — but with granular access to markets — then people can make content, they can get paid for content, and they can have incentives to participate.
Creatives need money. They need money up front, they need money at the end, they need to be able to convince their investors, their parents, their friends, themselves. They need to see a way to make their work sustainable.
So many of our utterances as artists, our critical inquiry into the world, our unique points of view, are hampered by the inability to afford to create work sustainably. We get confused when we think about artists. We think they are “noble” or “sacrificing it all” — and we forget that they often do it for cash.
We live in a world where the bottom rungs are knocked out. It is precisely in the smaller transactions where we need to provide more access to markets.
We need to foster a world where first time creators can have some voice, have some success — and not merely be harvested as part of a larger publishers revenue stabilizing model.
More granular access to markets, such as afforded by NFTs will also smoothly reduce the barriers between creators and consumers. If anybody can create then anybody will create. It will be more “human”; more participatory — where we all have voice — and are rewarded for it.
The future may in fact feel like something of a more natural world. Like an ecosystem. Where we will focus on what sincere stories, utterances, experiences, art and uniquely aesthetic point of view that we want to share — and less on permission to share it. And find ourselves rewarded for our work insofar as that work finds audience, not because an upstream gatekeeper has permitted it.
If this is a future you want to be a part of — please join us at our event November 5th 2020: https://futureofwebmonetization.web.app .
(*) I consider William Gibson’s use of the word cyberspace to be different enough that it is effectively a homonym — and I see him as ‘reading in’ on the zeitgeist; not entirely understanding why he chooses this word. I still see it as the demarcation or creation of a new realm. However from Wikipedia: The term “cyberspace” first appeared in the visual arts in the late 1960s, when Danish artist Susanne Ussing (1940–1998) and her partner architect Carsten Hoff (b. 1934) constituted themselves as Atelier Cyberspace. Under this name the two made a series of installations and images entitled “sensory spaces” that were based on the principle of open systems adaptable to various influences, such as human movement and the behaviour of new materials.
